Spouses David and Coordinated Group, Inc. vs.

Construction Industry Arbitration Commission

and Spouses Quiambao
G.R. No. 159795; July 30, 2004
Justice Puno

Facts:
1. Petitioner Coordinated Group, Inc. (CGI) is a corporation engaged in the construction
business, with petitioner-spouses Roberto and Evelyn David as its President and
Treasurer, respectively.
2. Respondent spouses Narciso and Aida Quiambao engaged the services of petitioner CGI
to design and construct a five-storey concrete office/residential building on their land in
Tondo, Manila. The Design/Build Contract of the parties provided that: (a) petitioner CGI
shall prepare the working drawings for the construction project; (b) respondents shall
pay petitioner CGI the sum of Seven Million Three Hundred Nine Thousand Eight
Hundred Twenty-One and 51/100 Pesos (P7,309,821.51) for the construction of the
building, including the costs of labor, materials and equipment, and Two Hundred
Thousand Pesos (P200,000.00) for the cost of the design; and (c) the construction of the
building shall be completed within nine (9) months after securing the building permit.
3. However, petitioners failed to follow the specifications and plans as previously agreed
upon. Respondents demanded the correction of the errors but petitioners failed to act
on their complaint. Consequently, respondents rescinded the contract on October 31,
1998, after paying 74.84% of the cost of construction.
4. Respondents then engaged the services of another contractor, RRA and Associates, to
inspect the project and assess the actual accomplishment of petitioners in the
construction of the building. It was found that petitioners revised and deviated from the
structural plan of the building without notice to or approval by the respondents.
5. Respondents filed a case for breach of contract against petitioners before the Regional
Trial Court (RTC) of Manila. At the pre-trial conference, the parties agreed to submit the
case for arbitration to the Construction Industry Arbitration Commission (CIAC).
6. Atty. Custodio O. Parlade was appointed by the CIAC as sole arbitrator to resolve the
dispute. With the agreement of the parties, Atty. Parlade designated Engr. Loreto C.
Aquino to assist him in assessing the technical aspect of the case.
7. The RTC of Manila then dismissed the case and transmitted its records to the CIAC.
8. After conducting hearings and two (2) ocular inspections of the construction site, the
arbitrator rendered judgment against petitioners.
9. Petitioners appealed to the Court of Appeals which affirmed the arbitrator’s decision
but deleted the award for lost rentals.

Issue:
Whether or not petitioners can be held jointly and severally liable with co-petitioner
Coordinated Group, Inc.

Ruling:
 The issue may appear to be a question of law as it would call for application of the law
on the separate liability of a corporation. However, the law can be applied only after
establishing a factual basis, i.e., whether petitioner spouses as corporate officers were grossly
negligent in ordering the revisions on the construction plan without the knowledge and consent
of the respondent spouses. On this issue, the Court of Appeals again affirmed the factual
findings of the arbitrator, thus:
As a general rule, the officers of a corporation are not personally liable
for their official acts unless it is shown that they have exceeded their authority.
However, the personal liability of a corporate director, trustee or officer, along
with corporation, may so validly attach when he assents to a patently unlawful
act of the corporation or for bad faith or gross negligence in directing its affairs.
The following findings of public respondent (CIAC) would support its
ruling in holding petitioners severally and jointly liable with the Corporation:
"x x x When asked whether the Building was
underdesigned considering the poor quality of the soil, Engr.
Villasenor defended his structural design as adequate. He
admitted that the revision of the plans which resulted in the
construction of additional columns was in pursuance of the
request of Engr. David to revise the structural plans to provide
for a significant reduction of the cost of construction. When Engr.
David was asked for the justification for the revision of the plans,
he confirmed that he wanted to reduce the cost of construction.
x x x"
Thus, the petitioner spouses can be held jointly and severally liable with co-petitioner
Coordinated Group, Inc.